The votes on TFG’s CFO and CEO remuneration failed in last week’s AGM, with top executive Anthony Thunström taking home almost R64m in 2023.
This is the fifth year running that at least one of the two votes at TFG — owner of 30 brands including Coricraft, American Swiss, Markham, Foschini and Jet — has failed. Business Day is unaware of any company with as poor a track record.
JSE-listed companies must hold two nonbinding advisory votes on pay annually and if one or both fail, they must meet dissenting shareholders.
Both TFG’s pay votes failed to reach the 75% majority in 2020, 2021 and 2023 but one each passed in 2019 and 2022.
Despite four years’ shareholder dissent, Thunström’s base pay increased from R10m in 2022 to R15m at end-March.
TFG increased ordinary staff pay 5% in the year to end-March.
CFO Bongiwe Ntuli’s base pay rose 17% to R8m.
The continued failure of TFG’s remuneration votes shows up their non-binding nature and the lack of consequences.
In Australia, the so-called two-strike rule means the remuneration board must step down after two consecutive failures.
Thunström took home R63.8m to end-March because long-term shares awarded in November 2020 worth R31.4m vested and he earned a short-term bonus of more than R14m and R2.9m in dividends. Ntuli earned R29.4m, up from R18.1m.
In 2022, Thunström earned R34.2m.
Extremely high
In 2021, he controversially earned R56.5m, which included a R38m long-term bonus even as the group reported its first annual loss due to Covid-19 lockdown store closures in the UK, SA and Australia.
The percentage of votes against TFG pay at its Thursday AGM was extremely high with 71% voting against the remuneration policy and 56% against the remuneration report.
Chief investment officer at Aeon Investment Management Asief Mohamed said he was “surprised” at the extent of the vote against the remuneration policy.
“It may have been among the highest vote against in the history of remuneration policy votes,” Mohamed said.
When Woolworths’ outgoing CEO Ian Moir was given a golden handshake of R77m in 2020, after the failed David Jones deal that cost the company more than R14bn, 82% voted against the remuneration policy, eclipsing the dissent TFG faced last week.
It is not always clear why votes fail as fund managers release their voting patterns months later, and if meetings between unhappy shareholders and the company occur, it takes place behind closed doors.
Mohamed said: “I can only guess that the [TFG executive] remuneration is either excessive and or the share price returns have been poor and shareholders are unhappy about it and can only express it via the remuneration policy vote.”
Not only is it difficult to make sense of the remuneration votes, but sometimes dissenting shareholders do not even contact the company to specify their concerns.
Meets shareholders
Private school group Curro issued a JSE news announcement in August explaining it could not meet dissenting shareholders as they did not contact them as requested.
TFG said the remuneration committee chair meets major shareholders quarterly.
“These open and transparent engagements have been key to addressing the various challenges facing the committee relating to the retention challenges of our senior executives, as well as how we can align our remuneration policies to support our most vulnerable employees.”
Changes the remuneration committee has made include that in 2022 no shares were allocated as pay without executives having to meet performance conditions.
For the 2023 year to end-March, TFG had increased the minimum shareholding requirement of the CEO and CFO to ensure their interests are aligned to that of shareholders.
It also adds longer-term conditions to the short-term bonus pay after criticism that the annual short-term incentive performance conditions were too limited.
TFG says it has included more information on performance expectations linked to bonuses, without compromising sensitive information.
TFG updated its benchmarking assessments against similar-sized companies and found its pay levels to be appropriate, it said in its annual report. Companies that it compared executive pay to included Mr Price, Pepkor, Clicks, Telkom, Shoprite, Aspen and MultiChoice.
During the year under review, PwC and DG Capital served as the remuneration advisers.
TFG says it pays executive directors based on the complexity of the business, the diverse nature of the business, which includes retail, online sales and manufacturing, and that it is based in Africa, the UK and Australia.
While executive pay is high, the group is facing constrained consumers and lowering returns.
TFG expects headline earnings for the six months to September to be down by as much as 25% as sales declined in SA, Australia and the UK.
TFG directors sold off almost R7m in shares in July.
TFG was removed from the MSCI emerging market index in August, leading to a sell off by exchange-traded funds that hold shares represented by the index. The index tracks key companies in 25 emerging countries.
The share price, down about 32% in the past year and 7.7% in the year to date, has dropped 43% in five years.
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